Buffett famously underwrites with a 9% discount rate. 3 for inflation. 3 for uncertainty. And 3 for real return. He gets away with a very small uncertainty because he invests in things that he knows well.

The discount rate is about two things - time value of money and uncertainty. So it's essentially two parts - the interest rate component and the risk component. By reducing uncertainty, you reduce the discount rate. By reducing the time period, you reduce the effect. So when we are talking about one specific component of a valuation (the TV rights deal), yes this is how it works.

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The cost of capital is also included in the price, otherwise no trades would be performed between rational agents and there wouldn't be any market. And no, it still sounds like you are disregarding that the uncertainty/risk discount exists because of a factor that is equal to the discount - i.e the risk. This is why it doesn't make any sense to make claims like "That is why he would be stupid to sell now, rather than after it is implemented." It makes as much sense as to claim "That is why he would be stupid to buy when it is implemented, rather than now." The price mechanisms work both ways.

And no, it still sounds like you are disregarding that the uncertainty/risk discount exists because of a factor that is equal to the discount - i.e the risk.

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Please explain how I disregarded the inclusion of risk in the discount rate. I said that you can reduce the discount related to risk by reducing the level of uncertainty about future cash flows - say like, signing a new TV rights deal. That seems like an event which may reduce the level of uncertainty, and hence the discount rate.

This is why it doesn't make any sense to make claims like "That is why he would be stupid to sell now, rather than after it is implemented." It makes as much sense as to claim "That is why he would be stupid to buy when it is implemented, rather than now." The price mechanisms work both ways.

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It doesn't if you think that rational actors rule the NBA franchise market. But they clearly don't.

I like how a modern sports argument devolves into things like "I said that you an reduce the discount related to risk by reducing the level of uncertainty about future cash flows." WHAT A TIME TO BE ALIVE!!!

Please explain how I disregarded the inclusion of risk in the discount rate. I said that you can reduce the discount related to risk by reducing the level of uncertainty about future cash flows - say like, signing a new TV rights deal. That seems like an event which may reduce the level of uncertainty, and hence the discount rate

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Because you haven't mentionened the negative aspects of risk once, only that you can earn money by waiting and lessening the risk. With this reasoning every seller would always wait and every buyer would never wait, aka no market. Good thing there is a mechanism that takes care of this - the price.

So financing costs doesn't affect the price? That's an odd statement. Everything affects the price. There are no things that are included in the discount rate but not in the price.

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They do, but indirectly, through the discount rate. I feel like I am repeating myself here. Does the discount rate affect the price? Yes. Do financing costs impact on your decision to make an investment? They shouldn't, but they are included in the discount rate via the expected yield.

Because you haven't mentionened the negative aspects of risk once, only that you can earn money by waiting and lessening the risk. With this reasoning every seller would always wait and every buyer would never wait, aka no market. Good thing there is a mechanism that takes care of this - the price.

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Risk is just risk. It's not inherently positive or negative. It's also arbitrary. All I have done is explained how a discount rate will have less effect on a positive cash flow if the length of exposure to discount is smaller. This isn't rocket science. I don't think you really get what a discount rate is, or are just disagreeing with me to disagree with me.

So the reason owners should wait to sell until after the next tv licence deal is because they are irrational actors? I guess we are not getting further here.

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I think there is a fundamental misunderstanding of what a rational actor is here. Steve Ballmer and co offering double what the Ranadive's ponied up was irrational. Getting turned down was even more irrational. I'm saying that it is in his best interests to wait and sell after the TV deal is negotiated based on the information available to me, which is, that the TV will be significantly larger than the last one.

Just remember, we were only talking about a single event (the TV deal being signed). There are negative cashflow events where timing has to be considered (paying luxury tax, new CBA's being negotiated, large scale salary cap changes) that will have an effect on price.

Yes, you are repeating yourself but it doesn't seem like you understand how pricing mechanisms work.

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I'm going to have to respectfully disagree with you on this one. This has nothing to do with pricing mechanisms, we were talking about the discount rate which forms part of a valuation. Valuations =/= price.